BP rebounds into profit on high oil prices

26th July 2011, Comments 0 comments

British energy giant BP bounced back into profit in the second quarter thanks to high oil prices and after a huge loss last year caused by costs linked to the Gulf of Mexico oil spill disaster, it said Tuesday.

Earnings after taxation hit $5.62 billion (3.87 billion euros) in the three months to June, BP said in a results statement. That compared with a vast loss of $17.15 billion in the second quarter of 2010.

However BP shares sank 2.56 percent to close at 463.25 pence on London's FTSE 100 index -- which edged up 0.08 percent -- as investors focused on adjusted earnings which dashed analysts' expectations.

Adjusted net profit -- stripping out fluctuations in the value of energy inventories -- hit $5.3 billion in the second quarter of 2011 after a huge loss of $16.97 billion last time around.

The reading fell short of market expectations for adjusted profit of about $6 billion.

"BP remains a work in progress having missed estimates at the half year point," said Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers.

He added: "Shadows from the Gulf spill may have lightened, but the forced disposal programme has had an inevitable effect on output."

Production meanwhile plunged nearly 11 percent to 3.43 million barrels of oil equivalent per day in the second quarter, which mostly reflected the suspension of drilling activities in the Gulf of Mexico.

Output was also hit as the group sold off $25 billion of assets to help foot the bill for the disaster.

But the company was boosted by high oil prices, which soared during the reporting period amid violent unrest in the crude-producing Middle East and North Africa region.

The average price of London Brent crude oil rocketed by almost 50 percent to stand at $117.04 per barrel in the second quarter.

Chief executive Bob Dudley said that the group was making speedy progress as it sought to draw a line under the 2010 disaster.

"BP is making rapid progress against our priorities. In February we said we expected 2011 to be a year of consolidation as we reset the focus of the company," Dudley said in the earnings release.

"This is going well, while it is having the expected near-term impact on our volumes and costs."

Total revenues soared by 39 percent to $103.84 billion in the second quarter, compared with $75.87 billion last time around.

BP added Tuesday that it continued to meet costs in the Gulf coast and has now paid out $6.8 billion in claims and government payouts to fund economic and environmental restoration.

And the group revealed that total clean-up costs now stand at $40.7 billion, down from previous guidance of $41.3 billion.

The group took a $600-million credit after reaching settlements with MOEX USA Corporation, a US subsidiary of Japanese trading house Mitsui & Co which has a 10-percent stake in the Macondo well project, and contractor Weatherford.

In order to meet its own compensation costs, BP is seeking to raise a total of $30 billion by the end of the year.

So far, it has sold assets in Argentina, Colombia, Egypt, the United States, Venezuela and Vietnam.

American Dudley has sought to move on from the catastrophe with a major shake-up that created a powerful safety division and overhauled the group's structure.

However, he failed in his attempt at a historic tie-up with Russian state-owned energy giant Rosneft earlier this year. The deal collapsed in May over protests by BP's Russian partners in its local joint venture and the subsequent failure of efforts to buy out the unhappy shareholders.

© 2011 AFP

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